Analysts: Verizon iPhone will put brakes on US Android growth

Android devices have seen significant growth lately, but that trend may be put …

Android phones have been enjoying significant growth in the smartphone market over the last year or so, but several industry analysts believe that the newly introduced Verizon iPhone is about to put the brakes on that trend. They say the reason Android has seen so much success in the mass market wasn't because of Android's strengths, but because it was available on more networks than the iPhone. Now that the Verizon iPhone is here: bring it on.

"A lot of people who bought Android phones were buying it in lieu of an iPhone because they couldn’t get one on the Verizon network," Needham & Co. analyst Charlie Wolf said after the Verizon iPhone announcement. "Where the iPhone will have a dramatic impact is on the brand choices of feature phone users migrating to smartphones going forward. The iPhone will suck the wind out of Android’s growth on Verizon."

In agreement is Kaufman Bros. analyst Shaw Wu, who predicted earlier this week that the Verizon iPhone would turn up the heat on Android in the smartphone market. The iPhone being available on the top two US carriers will be "the first true test for Android whether its share gains are real or just a temporary phenomenon due to weak competition from BlackBerry, Windows, webOS, Nokia, and others," Wu said.

Indeed, it seems like it's not just geeks who have been buying up non-BlackBerry, non-iPhone devices as of late. How many of those potential or recent Android customers will now divert their attention to the Verizon iPhone, though? It certainly depends on their motivating factor for getting an Android device in the first place, but if these analysts are correct, 2011 could show a resurgence of iPhone growth in the US.

It certainly makes the smartphone race interesting. I feel the iPhone is kinda gimped on CDMA due to no simultaneous voice/data, especially since it acts like a hotspot now. But the general user either won't care about this or just not even know.So let's see what happens.

The iPhone is not a silver bullet. It is a good device but it doesn't have every thing one could ever want from a phone and the planned obsolescence model apple is basing their mobile devices on is a sticking point with most business customers.

The iPhone is still just one device, Diversity in carrier is just one thing, but a variety of features and price points is likely the greater reason for Android success. I think for most folks, carrier isn't all that important and I didn't see anything from Verizon that promised anything different (e.g. much lower prices). I think this is a case where the Ars audience differes from the general population who don't make as great a distinction between carriers and likely have an iPhone if they wanted one. Perhaps some will change from AT&T to Verizon and certainly there will be some overall bump, but it may not be as dramatic as some predict. Time will tell.

I think it's certainly in-inevitable that the iPhone being available on Verizon will cause some phone-buyers to opt for any iPhone over and Android based phone, and I think you'll probably see a big surge in iPhone popularity immediately post launch on Verizon, but in the long term, I think Android will still grow to number one market share, just because every smartphone manufacturer except for Apple, Nokia, and RIM is pushing Android and it seems unreasonable that any of these three market players will be able to hold more market-share than HTC, Motorola, Sony, and Samsung combined.

But that's just speculation, I suspect if you really wanted to see what a landscape without an exclusive deal on the iPhone looks like, you'd simply look at the European or Asian smartphone markets and look at the market share that doesn't belong to Nokia.

This will be interesting to watch in the next couple years. Anecdotally, a few months ago my roommate wanted an iPhone but had Verizon service. He sat down and looked at what it would cost for AT&T service compared to Verizon based on discounts he had, etc etc. He eventually went with the Droid Incredible on Verizon and loves it. But if they had the iPhone when he was looking he wouldn't have given it a second thought and grabbed the iPhone.

Again, it's totally anecdotal and I'm not saying it proves anything. But I'm curious if this will be the case. Apple, love them or hate them, has a very prolific brand name and it could cut into Android growth now that they have inroads into the 2 largest cell phone providers in the US.

Well let's see who is right in terms of the Apple issues is it AT&T or Apple. Remember that AT&T side of the issue is that its an iPhone hardware issue for most of the problems people are having.

Frankly I hate AT&T, Verizon and Apple. AT&T and Verizon both lost a custom in me with all their billing mistakes and hostile customer service when it was a clear issue on their side. Also their data plans are to expensive. Its less then $15 a month for unlimited data family plan on Sprint.

Meh, analysts. The Verizon iPhone will certainly change the landscape a little bit, but I have to believe that most of the Apple fanboys are already on AT&T, and will change over to Verizon only slowly as their contracts run out. I also know plenty of people who like their Android phones better than the iPhone. There will be a big surge when it's released, then some percentage of Verizon phones will be the iPhone from then on, but it won't be overwhelming. The iPhone just isn't as unique or shiny as it was a few years ago.

There will also be a ton of Android phones sold at prices Apple will never be willing to go. A few more months and an Android phone comparable to the iPhone in power will be a free with subsidy phone.

It will be hard to get people entrenched in either to move. In both cases you get stuck by having a bunch of apps you purchased. For instance, my wife and I both have navigation software on our iPhones, games, apps, etc... that probably amount to $300+.

Then you have accessories, which Apple does have a tendency to make obsolete anyway with an upgrade. But pretending they don't, that is another cost to switch platforms.

Android looks more interesting to me because I can switch phones to more possibilities instead of hoping Apple delivers on a model I feel is truly better. I won't say the iPhone is bad, but I would have gone with other priorities in upgrades over what they decided to make into the iPhone 4.

This will be interesting to watch in the next couple years. Anecdotally, a few months ago my roommate wanted an iPhone but had Verizon service. He sat down and looked at what it would cost for AT&T service compared to Verizon based on discounts he had, etc etc. He eventually went with the Droid Incredible on Verizon and loves it. But if they had the iPhone when he was looking he wouldn't have given it a second thought and grabbed the iPhone.

Again, it's totally anecdotal and I'm not saying it proves anything. But I'm curious if this will be the case. Apple, love them or hate them, has a very prolific brand name and it could cut into Android growth now that they have inroads into the 2 largest cell phone providers in the US.

And now he can't get a subsidized update to an iPhone for another year or so (assuming he got the Incredible back in May/June). In that time he might decide that he likes what he has and doesn't want to switch.

I'd expect to see a lot more cannibalization than Android impact. Undoubtedly there will be some reduction in Android sales, but for the most part, if people wanted an iPhone, they've already gotten it. The average US consumer doesn't seem to care which carrier they use, unless a given carrier actually does not work in their area. The areas affected by that are generally low population anyway, so that shouldn't have much of an impact.

What are the numbers like in Europe?The iPhone's been on almost all the carriers here for some time, it would make a good comparison...

It wouldn't make for a very good comparison because Europe hasn't had the same Android growth. Approximately the same number of people have Android phones as have iPhones in the US, so it's not hard to get an opinion of the device. There's been a ton of advertising, and it's a completely different market structure. Now, if Europe used to have exclusivity, then changed, it would be a good comparison. As it is, it's not very useful.

I think that there will obviously be more iPhone sales. That's the point of it being on another carrier. Android will lose some of its sales as that happens. However, I think this ignores the fact there is a somewhat growing group of people who do not want to join the ranks of the iPhone owners because of a negative attitude toward Apple. That is not because of anything we technophiles care about, but more to do with the advertising of years past. I'm specifically thinking of the iPhone on the Island of Misfit Toys, etc. Plus, Verizon did a good job of pushing the Droid as the man's manphone. /grunt I think that there is an attitude that the iPhone is for a certain class of person and there's a group of people who'd reject joining that.

Of course, then there's the technophile that despises everything Apple. They probably aren't going to buy an iPhone either and will buy an Android phone out of spite (or the desire to have the most advanced, open phone). Then there will be the people who look at the features of each phone and decide that the Google services are superior to what Apple is providing for their use. Those that have bought Android apps and do not want to have to buy over for the iPhone ecosphere. Those that have used Android a long time and are satisfied with it.

But I think the new buyers that Android was surging on will wind up cooling down and going iPhone. At least, for a while. For Apple's sake, they need to have fixed the antenna issues or suddenly they'll have no excuse, no way to blame the network for their bad reception.

The big mover for iPhone on Verizon, imo, will probably be the iPad. If you're going to buy a Verizon iPad (which honestly there's just no Android match that even comes close to it in public eye), then you'd probably buy a Verizon iPhone, too. This is where Android is going to suffer and where they absolutely must get some traction. With Verizon pushing their new iPhone and iPad, don't count on Verizon to be very vocal about any android tablet they subsequently have or release.

This will all lead hopefully to a price war. Android is mostly free (if you ignore MS's protests to the contrary) and should enable much cheaper prices even on the same hardware. If Android starts to cool because it's priced equivalently to the iPhone, cutting the price and offering the same or more features at a lower price should help redress the balance.

I think this shift happened sooner than Apple would have liked, but they feared a remake of the old PC open vs Mac closed battle that ended so badly for Apple after such an auspicious start. I think they wanted to wait for next year when AT&T and Verizon were both on the same 4G LTE network protocol which would have been a lot cheaper. Google was arguably on the verge or had already surpassed them. If that happened and the press got wind of it, the iPhone might suffer for the perception that it was not "hot" anymore.

Launching on Verizon helps restore that hotness. It is up to Google to make Android work. They have to get the fragmentation issue fixed and get a featureset that continues to pressure Apple to do more.

I'd be interested to see how this affects AT&T's Android/WP7/BB population. Now that the iPhone isn't exclusive, they don't have the incentive to protect it. They'll be more willing to advertise and push those phones than they were before. Last I had seen, smartphones on AT&T were almost exclusively iPhone. I wonder who will make out the best in the power vaccuum.

, Diversity in carrier is just one thing, but a variety of features and price points is likely the greater reason for Android success. .

If the experience outside the US is anything to go by, this is not the case. Where you have multiple carriers for the iPhone, like here in Canuckia, Android is almost non-existant.

That said, Android never had a chance to get its foot in the door here. There were 3GS's on all three carriers right when Android was being released. In the US, Verizon had a year to really establish it in the market.

I'm still on the side of the article, but by no means in the "slam dunk" category.

But I think the new buyers that Android was surging on will wind up cooling down and going iPhone. At least, for a while. For Apple's sake, they need to have fixed the antenna issues or suddenly they'll have no excuse, no way to blame the network for their bad reception..

Sorry to clip out the rest of an excellent analysis and leave just this, but... this issue simply doesn't exist anywhere else. And apparently it doesn't exist on CDMA. And as far as I can tell, it has had zero effect on consumer expectations or purchases. So basically my point is this is not an issue that will have any effect on sales, even if it does happen.

I get the feeling that CDMA being unavailable in most countries and not being able to use data while talking are going to be deal breakers for a lot of people. I just stated the obvious and made a prediction regarding sales trends, can I be an analyst now?

the planned obsolescence model apple is basing their mobile devices on is a sticking point with most business customers.

I see way more planned obsolescence in the Android world than Apple's. For example, I have a brand new Android phone that's stuck on Android v2.1 with no hope of ever getting to v2.2 or v2.3. I also have an iPod touch that's two or three years old and is running the latest version of iOS.

But I think the new buyers that Android was surging on will wind up cooling down and going iPhone. At least, for a while. For Apple's sake, they need to have fixed the antenna issues or suddenly they'll have no excuse, no way to blame the network for their bad reception..

Sorry to clip out the rest of an excellent analysis and leave just this, but... this issue simply doesn't exist anywhere else. And apparently it doesn't exist on CDMA. And as far as I can tell, it has had zero effect on consumer expectations or purchases. So basically my point is this is not an issue that will have any effect on sales, even if it does happen.

I think Apple might have stealth-fixed their antenna problem. I just upgraded to the iPhone over the holidays and I haven't noticed any drop in signal reception when I make calls or hold the phone a certain way.

The iPhone is not a silver bullet. It is a good device but it doesn't have every thing one could ever want from a phone and the planned obsolescence model apple is basing their mobile devices on is a sticking point with most business customers.

no single device, from any vendor, planned, announced, or even on drawing boards, is a do-all device.

That's not the point of this discussion. No one is saying the iPhone will beat all others and become "the one" device, they're just stating the obvious, android has 240m potential buyers in the US, Apple this far had 90m, now they'll have about 180m. A percentage of those consistent with other vendors/carriers (20-30%) will but the iPhone. Currently, Android, WP7, and RIM enjoy near 100% of VZW handsets, this just changed, and the 20% has to come from somewhere... In the short term, it will likely be 30-50% of their sales, then leveling off around 20%. It WILL cut into Android sales. It will also eat into RIM and WP7, but to a lesser extent since they're lesser players.

Q1 and Q2 should show a precipitous drop in Android sales from Verizon. 4-6m iPhones by end of q2 (3m in Q2 alone). This is likely to be a supply limited figure as well, as iPhone Retina screens are still enough of a supply constraint that apple is not currently selling the iPhone 4 in every nation they're selling a 3GS.

The worry a lot of people have is the sudden drop in android sales will draw undue or unfounded attention signaling a (nonexistent) paradigm shift, and android investment will stutter, and the latter could actually impact its success in real and tangible ways. for 1-2 quarters, android growth will not outpace the market, and Apple will by significant margins. This is short lived for you and me, but in the dev world and cellphone markets, 6 months is an etermity.

I see android floating around 15-20% of the market, iPhone 25-30%. (worldwide this is consistent on carriers that offer both devices side by side). Android is a power device for heavy users and tweakers, and a prefered device by many, but not by the masses.

A person might want an iPhone because it's a great phone, as are Android phones.

In your rabid attempts to flame and troll, you missed the point.

Why would any content (and the vast majority of them are content) Android owner switch to an iPhone? People make it out as if it were a foregone conclusion that "omg everyone wants an iPhone amirite?" That's not really true though. I know several people with Blackberries or Android phones on AT&T. None of the people I know on Verizon want an iPhone, even though many of them have smartphones. Sure, they might take a look at the phones the next time they upgrade, but there's no way they're shelling out $600 to jump on one right now. The people willing to buy a new iPhone with every new product release are the same who aren't going to let their Verizon preference stop them from switching carriers for an iPhone. Almost all the rabid hype chasers have switched to AT&T. The remaining people don't initially view the iPhone as superior, and aren't going to freak out about it in the way analysts like Wu are predicting.

Well, so working from Nielsen we can see that Android is roughly equivalent to iPhone on a quarterly basis, with the exception that we are counting Sprint, T-Mobile, AT&T, and Verizon together when comparing the two.

5.2m iPhones were activated on AT&T in the quarter overlapping the Comscore 3 month period, which means approximately 5.2m+ Android users (again, split between T-Mobile, Verizon, and Sprint) in that same quarter.

Top 4 providers are AT&T, Verizon, Sprint, and T-Mobile, at 92.8m, 93.2m, 48.8m and 38.5m, meaning Sprint and T-Mobile combined are very nearly as large as Verizon or AT&T (and this data meshes with other quarterly results I've seen).

So if we assume the population bases are fairly representative (with some differences due to size, in that there must be something about Sprint and T-Mobile uniquely different enough to prevent those users from moving to AT&T and Verizon), we have a 1:1:0.93 or 1:1:0.5:0.4 split

If all carriers had equally awesome Android phones you would expect the same split ratio betwixt them. Given AT&T has the weakest Android lineup, Verizon has a strong lineup, and Sprint has the strongest lineup, we might actually expect a higher number of proportional Android phones on Sprint.

So if last quarter had 5.2m Android users split amongst those four carriers, with 5.2m iPhone users on AT&T.

Also for convenience I will say AT&T has no Android users, which inflates the Verizon, Sprint, and T-Mobile numbers a bit, but that's not bad because it errs on the side of caution.

So if we have, betwixt Verizon, T-Mobile, and Sprint, a 1:0.52:0.41 split of 5.2m Android users, that means Verizon has 2.68m, Sprint 1.4m, and T-Mobile 1.1m Android subscribers in the August to November 3 month period.

2.68m Verizon Android users to 5.2m iPhone users, which is very nearly a 2:1 ratio.

This isn't using installed base, to project forward, but marketshare numbers.

The iPhone is still just one device, Diversity in carrier is just one thing, but a variety of features and price points is likely the greater reason for Android success. I think for most folks, carrier isn't all that important and I didn't see anything from Verizon that promised anything different (e.g. much lower prices).

This. iPhone will definitely eat into Android's numbers, but it won't stop Android from being the OS with the highest market share within a year or so.

Why would any content (and the vast majority of them are content) Android owner switch to an iPhone? People make it out as if it were a foregone conclusion that "omg everyone wants an iPhone amirite?" That's not really true though. I know several people with Blackberries or Android phones on AT&T. None of the people I know on Verizon want an iPhone, even though many of them have smartphones. Sure, they might take a look at the phones the next time they upgrade, but there's no way they're shelling out $600 to jump on one right now. The people willing to buy a new iPhone with every new product release are the same who aren't going to let their Verizon preference stop them from switching carriers for an iPhone. Almost all the rabid hype chasers have switched to AT&T. The remaining people don't initially view the iPhone as superior, and aren't going to freak out about it in the way analysts like Wu are predicting.

I actually just shelled out $600 ($500, really) to upgrade "right now", but there were multiple factors involved in my decision. It's safe to say that at least some people are going to do so. (Mainly, I had an iPod Touch that was running out of space and I wanted something with more storage. I also wanted to cut my devices from a blackberry + ipod down to just one device. )

The gateway drug for the iPhone is the iPod touch. How many kids got iPods for Christmas in the last year or two and have been busy buying games and music since then? The dream gadget for a lot of those kids is going to be an iPhone to replace their iPod.

I get the feeling that CDMA being unavailable in most countries and not being able to use data while talking are going to be deal breakers for a lot of people. I just stated the obvious and made a prediction regarding sales trends, can I be an analyst now?

This is an indicator of why VZW only gained 900K (with a total net after churn of less than 200K) new subscribers in Q3, while AT&T gained 2.4m (and a lower churn ratio, holding over to a net growth of 1m subscribers). It also may stand to why more iPhones alone were activated on new subscribers alone than total smart phones of all models on VZW in the same time (with existing subscriber upgrades nearly doubling that number). However Android, WP7, RIM, etc devices all have the exact same limitation as iOS on VZW, so this is not a metric to compare the two.

Limited CDMA world use will ensure apple more tightly controls the CDMA iPhone supply line, since there's no where to dump devices VZW customers don't buy, and that will likely be a bigger reason the iPhone doesn't take off on VZW as fast as some speculate, but I think screen availability is an even bigger limiting factor currently.

What are the numbers like in Europe?The iPhone's been on almost all the carriers here for some time, it would make a good comparison...

It wouldn't make for a very good comparison because Europe hasn't had the same Android growth.

Hrmmmm, maybe there actually is some data "hidden" in that? LOL

Not at all. Android didn't grow in Europe because the market was pretty well saturated. Android grew in the US because Verizon and T-Mobile didn't have anything else to push on their customers. Getting a foot in the door is the most important thing for a product. Just ask Palm.

I disagree. I'm very happy with my Android device, and even though I can now have the option to get an iPhone, I still won't switch. I consider it overpriced (I don't sign contracts to get a discount, I buy them outright and pay month to month) and quite frankly, inferior to my current Android device.

We also have to remember, AT&T and Verizon are not the only networks. We forget about T-Mobile, Verizon, the regional carriers, the pre-paid carriers, etc. These guys still don't have the iPhone.